Thursday 29th January: Daily technical outlook and review.

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EUR/USD:

Weekly Timeframe: Current trading action on the weekly timeframe shows buying interest coming from a weekly Quasimodo support level at 1.1109. To the upside, we see potential resistance sitting around a nice-looking weekly supply area at 1.1678-1.1458.

Daily Timeframe: The daily timeframe on the other hand shows that the market rebounded from a daily swap level resistance yesterday seen at 1.1378. This level remains a key obstacle to a move towards a daily decision-point supply area at 1.1678-1.1540 (located deep within the aforementioned weekly supply area).

4hr Timeframe: Recent developments on the 4hr timeframe show that the market saw selling pressure from the 1.1400 handle, which as a result forced price to close below 1.1300.

From a technical standpoint, this is how we see the Euro at present – the weekly chart shows potential north, while the daily chart is suggesting buying may not be such a good idea at the moment (see above). So, where does this leave us on the 4hr timeframe? Well, buying the Euro from the near-term 4hr decision-point demand area at 1.1222-1.1253 could potentially cause unnecessary stress especially with resistance looming just above at 1.1300. Waiting for prices to break above and retest 1.1300 would be a far more conservative approach, and one that we firmly support.

Given the points made above, we think it may be better to sit this one out, as we feel (for lack of a better word) cornered so to speak.

Current buy/sell levels:

Buy orders: Flat (Predicative stop-loss orders seen at: N/A).

Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

GBP/USD:

Weekly Timeframe: Trading action on the weekly timeframe shows active buying being seen within a major weekly demand area at 1.4812-1.5097. Assuming that the buyers can continue with this tempo, we feel there is a good chance that price will likely hit a major weekly swap level coming in at 1.5270.

Daily Timeframe: The daily timeframe shows that active sellers were seen coming into the market yesterday, which was in all likelihood triggered from the recent break above the daily supply area seen at 1.5211-1.5140.

4hr Timeframe: For anyone who read our analysis on the GBP yesterday, you may recall us mentioning that we could do one of three things; here is a quick snapshot for those who did not:

Watch for selling confirmation around 1.5200, and strictly target 1.5109. The reason we say strictly is simply because we’re currently trading out of higher-timeframe weekly demand (see above) at the moment.

If price declines in value down to the 4hr decision-point demand area at 1.5058-1.5103, look for buying confirmation on the lower timeframes around 1.5109.

And finally, if price breaks above 1.5200, we could look to play the retest and target 1.5266, seen just below the aforementioned 4hr supply area.

As we can see, number two is yet to come to fruition, but may well do if price continues to decline in value. Number three for the time being is out of the question. Number one however is something we hope our readers are currently riding south as there were quite a few opportunities to enter short on the 15 minute timeframe, unfortunately for us though we were not at our desks!

Please remember to carefully monitor your position(s) if short from 1.5200 as prices could turn north at any point for the reason stated above in bold.

AUD/USD:

Weekly Timeframe: The weekly timeframe shows that the buying pressure seems to be diminishing within the current weekly demand area (0.7699-0.7974) at the moment. It will be interesting to see what the lower timeframes make of this.

Daily Timeframe: The daily timeframe shows that the recent selling strength is emanating from a small, yet clearly powerful daily supply area seen at 0.8050-0.7994. In the event that the sellers continue with this tempo, we feel there’s a good chance that prices will likely test a daily Quasimodo support area coming in at 0.7699-0.7834 (located deep within weekly demand at 0.7699-0.7974).

4hr Timeframe: Fresh movements on the 4hr timeframe show price spring boarded itself north from 0.7900 towards 0.8000, which was later faked into a combined 4hr supply/ignored Quasimodo area at 0.8050-0.8016/0.8034 (located deep within the aforementioned daily supply). It was at this point a sell off begun consequently forcing the market back down towards 0.7900.

So, where do we go from here? Well with price is currently showing weakness within weekly demand at the moment, and the daily chart showing price could indeed be heading further south before any noteworthy buying takes place (see above), we feel going long may not be the best path to take at the moment. Likewise, selling into this market is something we would not be comfortable doing, owing to the fact that we would effectively be selling into higher-timeframe demand (see above).

Current buy/sell levels:

Buy orders: Flat (Predicative stop-loss orders seen at: N/A).

Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

USD/JPY:

Weekly Timeframe: The USD/JPY pair really seems to have stagnated over the past two weeks as price continues to meander within last week’s range (118.85/116.91). From a long-term perspective, our bias remains north as long as the buyers continue to hold out above the major weekly swap level coming in at 115.50.

Daily Timeframe: Little price movement on the daily timeframe has resulted in the market remaining capped between a small daily supply area coming in at 119.95-119.14, and a daily demand area seen at 115.55-116.38. It will be interesting to see what the 4hr timeframe has to say about this…

4hr Timeframe: (Due to the little movements seen on this pair, our analysis remains unchanged).

The 4hr timeframe shows that the buyers and sellers continue to battle for position between a 4hr supply area seen at 118.84-118.52, and a 4hr demand area at 116.91-117.22.

With all of the above taken into consideration, we can see that the weekly timeframe is trading just above a weekly swap level (see above), while the daily timeframe on the other hand shows that in order for the market to continue north, price would need to take out the near-term daily supply area mentioned above at 119.95-119.14.That being the case, we believe there to be two options for any bulls out there:

Trade within the current 4hr range from the aforementioned 4hr demand area (tentative buy orders are seen just above at 117.25). This is clearly a respected zone, and will likely react again. However, we personally would only take a trade here with lower-timeframe confirmation since fakeouts are so very common within consolidative areas such as here.

The second option is a more conservative one, and requires patience. One would have to wait for price to close above the small 4hr supply area coming in at 119.31-119.12 (located just within the daily supply area mentioned above at 119.95-119.14). This will be the cue to begin looking for fresh longs as the path would then likely be clear up to a nice-looking 4hr supply area sitting at 120.73-120.39.

The approach to selling this market is a little different as we mustn’t forget that price is currently trading above a major weekly swap level (see above). Does this mean that selling is out of the question? Absolutely not. Areas to watch for selling action are as follows:

The 4hr supply area at 118.84-118.52, which forms the upper limit of the current 4hr range. Entering short at around 118.47 is a valid sell. But one that (in our opinion) requires confirmation.

The 4hr supply area that was just mentioned at 119.31-119.12 (tentative sell orders are seen just below at 119.08). This area is effectively the last line of defense for the aforementioned daily supply area. Again, we would only consider shorts here with corresponding lower-timeframe confirmation for reasons stated above.

USD/CAD:

Weekly Timeframe: The weekly timeframe shows that the buyers conquered yet another key weekly swap level last week seen at 1.2260. This move has potentially opened the gates for prices to challenge a major weekly Quasimodo resistance level seen at 1.2765.

Daily Timeframe: Recent movements on the Loonie show that price broke above a long-term daily supply area yesterday at 1.2504-1.2385. As such, this will likely inspire the buyers to continue pushing this market north towards another long-term daily supply area coming in at 1.2713-1.2595. This area remains a key obstacle to a move towards the aforementioned major weekly Quasimodo resistance level.

4hr Timeframe: The 4hr timeframe shows that the buyers clearly found strength around the 1.2400 threshold, as prices rocketed north breaking above 1.2500. In the event that price manages to close above and successfully retest it as support, we would be very interested in buying around this region with 1.2583 in mind as a target (seen just below the daily supply area mentioned above at 1.2713-1.2595).

Current buy/sell levels:

Buy orders: Flat (Predicative stop-loss orders seen at: N/A).

Sell orders: Flat (Predicative stop-loss orders seen at: N/A).

DAX 30:

Weekly Timeframe: The recent selling interest from 10853 seen on the weekly timeframe shows that price dipped below the weekly trendline support (formed from the high 7347 – 14/02/11). It will be interesting to see what the lower timeframes have to say about this…

Daily Timeframe: Yesterday saw the market close below the aforementioned weekly trendline support level. Assuming that the sellers can hold the market lower here, we see very little stopping prices from declining all the way down to a daily decision-point demand area coming in at 10148-10273. However, as traders, we always have to be prepared for the dreaded fakeout to happen.

4hr Timeframe: Traders who read our last report on the DAX may recall us mentioning that we placed a pending buy order just above a small 30 minute demand area (10592-10619) at 10621; this seemed like a logical area for longs at the time, since it was located relatively deep within the 4hr decision-point demand area at 10584-10658. But as we can all see, this was a clear loss as price eventually broke out south.

The break seen below the aforementioned 4hr decision-point demand area marked with a red arrow at 10551 has very likely triggered sell stops into the market, thus effectively consuming the buyers here. A successful break below 10551 today will likely suggest a more bearish tone, and also potentially clear the path down towards the 4hr ascending channel support (limits:9126 – 17/11/14, 10094 – 05/12/14). Ultimately though, we would like to see prices decline further than this down to around a 4hr decision-point demand area seen at 10228-10302 (located just within the aforementioned daily decision-point demand area). This would be a beautiful area to begin looking for buy trades around the 10317 point.

DOW 30:

Weekly Timeframe: The weekly timeframe shows that for seven consecutive weeks price has been hovering above an ignored weekly Quasimodo level at 17135. Provided that the buyers can continue to hold the market above this level, our bas will remain long.

Daily Timeframe: Yesterday saw the DOW decline in value a cool 273 points (figure includes pre/after-market hours), consequently forcing the market to test a daily demand area coming in at 17032-17186. Looking to the left, you’ll also notice that it beautifully surrounds the aforementioned ignored weekly Quasimodo level adding further weight to this zone.

4hr Timeframe: The recent decent has seen price take out a 4hr Quasimodo support level at 17254, and is at the time of writing seen hovering just above a 4hr decision-point demand (DPD) area coming in at 17084-17150.

This 4hr (DPD) area is an extremely confluent zone. It’s located within daily demand at 17032-17186, and as you can see (green level) it also surrounds the ignored weekly Quasimodo level mentioned above. In spite of this area’s confluence, we still require it to be confirmed on the lower timeframes for the simple reason that price could very well fake south to the 17032 low. That being the case, if price does indeed hit this 4hr (DPD) area today, we intend to watch price action around the 17159 mark, if we manage to find an entry long here, the first-take-profit target will be set at 17242, seen just below the ignored 4hr Quasimodo level.

XAU/USD (Gold):

Weekly Timeframe: Last week’s trading action shows that price pushed above a weekly supply area at 1296.3-1269.3. This in turn leaves the weekly supply area seen at 1391.9-1328.0 clearly in the limelight for the time being.

Daily Timeframe: The daily timeframe shows that the daily decision-point demand area at 1271.9-1281.3 is currently holding the market higher for the time being. This area is particularly significant to us since this is likely where pro money made the decision to break above the weekly supply area at 1296.3-1269.3.

4hr Timeframe: Recent developments on the 4hr timeframe show that the small 4hr supply area at 1299.0-1294.8 did indeed repel the market. With that, we feel there is a good chance that prices will continue to decline down to at least the 4hr demand area coming in at 1271.9-1277.1. It would be at this point where we’d begin watching the lower timeframes for buying confirmation around the 1278.5 mark. The reasons for why are as follows:

The recent drive into the aforementioned 4hr supply area has likely consumed sellers (red arrow), and thus weakened this zone.

Why we’re not entering with a pending buy order here is simply because this 4hr demand area is not fresh. To put it another way, the buying pressure here could potentially be weak from the recent touch seen at 1272.01 on 26/01/15. Assuming that a confirmed entry is seen, we will be looking to target 1305.20, a 4hr swap level which is historically respected.

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